This was done by blocking a shipment of semiconductors to Huawei Technologies from global chipmakers, a move that unsurprisingly infuriate Chinese officials and of which was followed up by harsh rhetoric from both sides.
Perhaps this move was political, as the November 2020 Presidential elections are rapidly approaching and recent polls have indicated that Americans on both the left and right spectrum are united in one front, their growing resentment towards China for their initial handling over the coronavirus crisis and apparent lack of shared information.
(Chart source, Pew Research)
Whether or not this resentment is founded is up for debate, however, this does not change the fact that it is there and it is growing, rapidly.
As seen from the chart above, approximately two thirds of Americans now have a negative view on China, which is the highest number since polling began in 2005.
(Chart source, Pew Research)
Many at first would dismiss this as a partisan issue, however, as previously indicated, this resentment is shared by both Democrats and Republicans, with the latter tending to be more negative than the former, which is of course to be expected.
Growing Resentment to Affect Spending Habits
Further indication that the trade wars are going nowhere anytime soon and are likely to be a favorable talking point heading into the 2020 elections was another recent poll, which indicates that this growing resentment towards China is very likely going to impact consumers spending habits moving forward.
A recent poll conducted by Bloomberg indicates that a growing number of Americans would be willing to spend more on products, if they were simply made outside of China;
(Chart source, Bloomberg)
In addition to the poll indicating that 40% of Americans would be boycotting goods made in China, Bloomberg's poll also discovered the following;
- 55% don’t think China can be trusted to follow through on its trade-deal commitments signed in January to buy more U.S. products.
- 78% percent said they’d be willing to pay more for products if the company that made them moved manufacturing out of China.
- 66% said they favor raising import restrictions over the pursuit of free-trade deals as a better way to boost the U.S. economy.
This is a growing trend that is likely creating great uncertainty within the Chinese government, given the fact that a very large percentage of their economy relies on exporting Chinese made goods to the United States, a shift in spending habits, even minor, could have dire consequences.
This situation is only going to get worse the longer this resentment remains, as it will force many U.S. businesses who manufacturer their goods in China, to shift production to new locations, whether that be back to the United States, or another country.
This will have a direct impact on the bottomline of many companies, hurting them in the short to medium term.
Resumption of the Cold War? Safe Haven Assets Rally
The markets hate uncertainty, and that is exactly what we have at the moment.
With the ongoing threat of COVID-19 and the intensifying of the US-China trade wars, it is no surprise to see precious metals rally once again.
(Chart source, goldprice.org)
Both gold and silver bullion have headed higher over the past week, with silver bullion experiencing a sharp rise in price, rally strongly into the $17 USD plus territory.
Although we have not hit "Cold War" status as of yet, we have undoubtedly entered into a period of "freezing over", now that both the sitting President and general public's opinions are solidly in alignment in their resentment towards the Chinese government.
The true risk is yet unknown however, as it is anyone best guess as to how this all unfolds.
How will China respond? What course of action will they take and will resentment among their population against the United States grow in tangent?
Things are likely to get a whole lot worse, before they get any better.
Uncertainty is plentiful and supply is no where near running out.
Stay safe and keep stacking.
- Source, Nathan McDonald via the Sprott Money Blog
